Think LauncherGuides · 14 October 2026
How to calculate landed cost, with a worked example
Landed cost is what a product really cost you by the time it is in your warehouse: the supplier’s price plus freight, import duty and the other charges it took to get it there. If your “cost per item” is just the supplier’s invoice price, your margins look better than they are.
What goes into landed cost
| Include | Usually leave out |
|---|---|
| Supplier price × quantity | Sales tax, GST or VAT you can reclaim |
| International and domestic freight | Shipping to your customers |
| Import duty and tariffs | Payment processing fees |
| Customs brokerage, port and handling fees | Returns and refunds |
| Cargo insurance | Advertising |
The right-hand column still matters for profit, but it belongs to the sale, not to the stock. Use the profit calculator for those.
The formula
Landed cost per unit = (supplier price × quantity + this product’s share of all charges) ÷ quantity
The only hard part is working out each product’s share when one shipment carries several products and the charges arrive as single lump sums.
Worked example
One shipment from one supplier, all in USD:
| Product | Quantity | Supplier price | Weight per unit | Goods cost |
|---|---|---|---|---|
| Product A | 100 | $12.00 | 0.4 kg | $1,200.00 |
| Product B | 50 | $25.00 | 1.1 kg | $1,250.00 |
Charges for the whole shipment:
- Freight: $600
- Brokerage and port fees: $150
- Import duty: 5% of goods value
Step 1: choose how to split each charge
The fairest split follows what drives the charge:
- Freight by weight, because carriers charge for weight or volume.
- Brokerage and fees by value, as a simple default. (Splitting by quantity is also reasonable if every unit is similar.)
- Duty by value, because duty is a percentage of each product’s value anyway.
Step 2: split each charge
| Charge | How | Product A | Product B |
|---|---|---|---|
| Freight $600 | By weight (40 kg and 55 kg) | $252.63 | $347.37 |
| Fees $150 | By value ($1,200 and $1,250) | $73.47 | $76.53 |
| Duty 5% | Of goods value | $60.00 | $62.50 |
| Total charges | $386.10 | $486.40 |
(Cents are rounded so each charge adds up exactly. For example, $252.63 + $347.37 = $600.00.)
Step 3: landed cost per unit
| Product A | Product B | |
|---|---|---|
| Goods cost | $1,200.00 | $1,250.00 |
| + charges | $386.10 | $486.40 |
| = total landed cost | $1,586.10 | $1,736.40 |
| ÷ quantity | 100 | 50 |
| Landed cost per unit | $15.86 | $34.73 |
So Product A, which the supplier invoiced at $12.00, really costs $15.86, about 32% more. Product B costs $34.73, not $25.00.
Why it matters: your margin
Say you sell Product A for $29 and Product B for $59:
| Margin using supplier price only | Margin using landed cost | |
|---|---|---|
| Product A | 58.6% | 45.3% |
| Product B | 57.6% | 41.1% |
Both products still make money, but the true margin is 13 to 17 points lower than the invoice makes it look. That gap decides how much discount a product can take. See how discounts turn a profitable product into a loss.
Adding new stock to old stock
If you already hold stock bought at a different cost, use a weighted average. Say you hold 40 units of Product A at $14.00 and receive the 100 above at $15.86:
(40 × $14.00 + 100 × $15.86) ÷ 140 = $15.33 per unit
That is the cost per item to record for all 140 units.
Common mistakes
- Forgetting duty or brokerage because they arrive on a different invoice, weeks later.
- Using the supplier’s currency for charges that were paid in yours, or the reverse. Convert each at its own exchange rate.
- Splitting everything by quantity when products differ a lot in size or value.
- Overwriting cost per item and losing the history. Keep a record of each shipment, so you can see why a cost changed.
Do it faster
- The free landed cost calculator does the split above for up to five products.
- Landrio does it for every shipment in your Shopify store, keeps Cost per item up to date and records the history, with one-click undo.